Nearly half of small business owners (49%) don’t know where to turn when they need support with their business finances, according to research from the Money Advice Trust, the charity behind Business Debtline. This is a worrying statistic which likely contributes to the failure of small and medium sized businesses. Business owners who don’t know where to look often wait until a tax bill, loan repayment or supplier invoice is already overdue before asking for help, and by that point, the options for managing business debt can be far more limited than if they’d acted sooner. The reassuring news is there are UK government-backed schemes specifically to give struggling businesses room to get their finances in order.

Why acting early makes managing business debt easier

Debt itself isn’t a sign of failure. Many thriving businesses use borrowing to fund growth, smooth seasonal dips or bridge large orders, particularly in sectors like construction where payment terms can be brutal. Problems tend to build when cash flow visibility slips and bills are left unopened rather than dealt with. If you’re not sure whether your business is already showing early warning signs, it’s worth reading our guide first. The schemes below work best when you engage with them before enforcement action starts, not after, so it’s worth understanding your options long before you actually need them.

HMRC Time to Pay arrangements

If your business owes tax you can’t pay in full, HMRC’s Time to Pay service lets you spread the cost through a formal instalment plan rather than facing immediate enforcement action. Self-assessment taxpayers owing £30,000 or less can set up a plan entirely online, without speaking to anyone at HMRC directly. For PAYE, VAT or Corporation Tax debts, businesses can typically negotiate arrangements of up to £100,000 by calling HMRC’s Business Payment Support Service.

You won’t be alone

Nearly 18,000 self-assessment payment plans were set up online between April and November 2025 alone, showing just how many people already use this route. Interest still accrues on the outstanding balance, so it isn’t free borrowing, but it avoids the late payment penalties and tougher debt enforcement powers HMRC can use if you simply stay silent. We’ve written a full guide to how HMRC payment plans work if you’d like more detail.

The Growth Guarantee Scheme

For businesses that need fresh finance to help consolidate their position rather than more time to pay an existing debt, the government-backed Growth Guarantee Scheme, run by the British Business Bank, can help. The scheme provides participating lenders with a 70% guarantee against the loan, making them more willing to lend to viable businesses that might otherwise be turned down. Crucially, that guarantee protects the lender, not you. As the borrower, you remain 100% liable for repaying whatever you borrow.

How much can you borrow?

Facilities of up to £2 million are available to businesses with turnover generally under £45 million, covering term loans, overdrafts, invoice finance and asset finance, and the scheme has recently been extended to March 2030. It can fund working capital as well as growth investment, so it’s worth exploring if cash flow pressure is limiting your options rather than a lack of demand.

The Debt Respite Scheme (Breathing Space)

For sole traders whose business debts are also personal debts, Breathing Space is worth knowing about too. This government scheme gives you up to 60 days of protection from most creditors: interest and charges are frozen, and no enforcement action can be taken while you get independent debt advice and work out a plan. It doesn’t write off what you owe and there are restrictions. It generally isn’t available if your business debt relates solely to a VAT-registered business, or to a partnership rather than you personally. Applications must go through an FCA-authorised debt adviser, such as Business Debtline, who will check your eligibility and apply on your behalf.

Free, independent advice on managing business debt

Not every business needs a loan or a formal HMRC arrangement. Sometimes what’s needed most is clear, judgement-free advice on which option actually fits your situation. Business Debtline, run by the Money Advice Trust, is a free, FCA-regulated charity offering exactly that. In 2024 it helped 37,800 small business owners and self-employed people by phone, with 90% of clients seeing their debts reduce or stabilise afterwards. It’s an excellent first port of call if you’re unsure whether Time to Pay, the Growth Guarantee Scheme, or another route entirely makes sense for you. As accountants, we’d always encourage a conversation with your own accountant too, well before things feel urgent – our guide on the questions worth asking regularly is a good place to start.

Free business support through your local Growth Hub

If what you need most is impartial guidance rather than borrowing, your local Growth Hub is worth a call before you commit to anything. Growth Hubs are government-funded and free to use, with 38 covering the whole of England – businesses in our area can reach the Kent and Medway Growth Hub directly. Advisers can point you towards local grants, funding schemes and lenders suited to your situation, and many business owners use them as a genuinely useful first stop.

When formal insolvency options become necessary

If debts have grown beyond what any payment plan or new lending can realistically manage, formal options such as a Company Voluntary Arrangement or administration, overseen by the Insolvency Service, may need to be considered. These routes exist to give viable businesses breathing space and a structured path forward, rather than being reserved only for closure. Directors’ duties change as a business approaches insolvency, so early, professional advice matters more than ever at this stage, as waiting rarely improves the options available.

Managing business debt doesn’t have to mean facing it alone.

Whether that’s a Time to Pay arrangement, a Growth Guarantee Scheme facility, free advice from Business Debtline, or simply an honest conversation with your accountant about your cash flow, the right support exists, and it works best when you reach for it early. If you’d like to talk through your options, give our friendly team a call on 01322 250001 for a free, no-obligation chat.

Frequently asked questions

What is HMRC Time to Pay and who can use it?

HMRC Time to Pay lets businesses and individuals spread a tax bill they can’t pay in full over an agreed number of instalments. Self-assessment taxpayers owing £30,000 or less can apply online, while larger PAYE, VAT or Corporation Tax debts are usually arranged by phone with HMRC’s Business Payment Support Service.

Does the Growth Guarantee Scheme mean the government pays part of my loan?

No, the government’s 70% guarantee under the Growth Guarantee Scheme protects the lender if you default, not you. As the borrower, you remain 100% liable for repaying the full amount you borrow.

Is business debtline only for businesses that are about to fail?

No, Business Debtline offers free, independent advice to any self-employed person or small business owner worried about debt, not just those facing imminent closure. Getting in touch early, before a debt problem escalates, generally gives you more options to resolve it.

When should I consider a Company Voluntary Arrangement or administration?

These formal, Insolvency Service-overseen routes are usually considered when debts have grown beyond what a payment plan or new borrowing can realistically manage. They’re designed to give a viable business breathing space and a structured way forward, so early professional advice is essential before deciding which option fits.

About the author

Michelle Adams is a qualified accountant and director at Adams Accountancy, a friendly all-female practice based in Dartford, Kent. With over 15 years’ experience helping sole traders, landlords and limited companies manage their finances across Kent and beyond, Michelle specialises in turning financial complexity into practical, plain-English action. Call us on 01322 250001 or contact us online for a free consultation.